Charity: Negative sentiment hits pub shares hard

For listed pub companies, 2007 was every bit as extraordinary in share-price terms as 2006.

In 2006, speculation over Real Estate Investment Trust (Reit) prospects and positive sentiment, underpinned by share buybacks, saw pub company share values rise by just under 50%.

The Reit froth was reaching its zenith towards the end of the calendar year, with Punch Taverns, for example, finishing 2006 up 51% at £12.79.

The Reit bubble expanded into the start of 2007 with Punch climbing to £14.00 at one stage.

The honeymoon was soon over and Punch, like the rest of the sector, fell victim to what one analyst James Ainsley, of JP Morgan, called a "savage de-rating"​ which has driven stocks down by an average of 36%.

The vast majority of the falls can be linked to the start of the credit crunch on 9 August.

This combined with more general concern about consumer confidence to create a market as bearish in 2007 as it was bullish in 2006.

Ignoring fundamentals​

Negative sentiment has chosen to ignore the fundamentals - earnings-per-share estimates have been little changed - in chopping at sector values.

In a number of cases, the huge share-price gains of 2006 have been more than stripped away by a pervasive lack of confidence that has seen investors moving out of equities.

Mitchells & Butlers suffered the cruellest fate in the sector. Aside from the arguments over the merits of selling its freeholds, there's no doubting their quality.

The arrival of the credit crunch was terrible timing, occurring on the very eve of the deal's completion. The 70% share gain of 2006, which had pushed the shares from 418p to 710p by the end of 2006 has gone into reverse since then.

The market does not believe that the debt markets will allow the deal to go ahead.

Clear evidence of the middle classes feeling the pinch has hardened negative sentiment.

JD Wetherspoon saw an incredible 110% climb in share value in 2006, reaching 710p at the year end. Even though the company is trading broadly in line with its expectations during the early months of the English and Welsh smoke ban, its share price has tanked down to around the £3.30 mark.

Surprise drop​

There's no doubt that company bosses have been as surprised at the depth of the share price declines in 2007 as they were by the increases of 2006.

Greene King boss Rooney Anand, for example, spent £47,850 on 2 August 2007 buying 5,000 shares at £9.57 each - the shares, riding high at £11.85 at one point in 2007 were trading at £7.03 on Monday.

Similarly, JD Wetherspoon founder Tim Martin must have thought company shares were terrific value when he spent £972,000 buying 250,000 shares for £3.89 per share on 22 November 2007 - he could have picked them up for £3.31 at one stage.

The losses of 2006 seem as overdone as the feverish rises of 2006, meaning shares are as under-priced as they were over-priced a year ago.